Cap Rate Calculator for Canadian Rental Properties 2025

Calculate cap rate, NOI, and implied property value for any Canadian rental property.

Cap Rate Calculator

Gross Annual Income
Vacancy Allowance
Effective Gross Income
Total Operating Expenses
Net Operating Income (NOI)
Cap Rate
Implied Value at 5% Cap Rate
Implied Value at 4% Cap Rate

What Is Cap Rate?

The capitalization rate (cap rate) is the ratio of a property's Net Operating Income (NOI) to its purchase price or market value. It measures a property's income yield independent of financing — making it the most widely used metric for comparing rental properties.

Cap Rate Formula:
Cap Rate = NOI ÷ Property Value × 100

NOI = Effective Gross Income − Operating Expenses
(Operating expenses exclude mortgage payments — cap rate is pre-financing)

What Is a Good Cap Rate in Canada?

Cap RateInterpretation
Below 3%Very low yield — primarily appreciation play (common in Vancouver)
3–4%Low yield — appreciation-driven market (Toronto, Vancouver)
4–5%Moderate — approaching cash-flow neutral with financing
5–7%Good — positive cash flow likely with typical financing
7%+Strong yield — smaller markets, higher risk/return

Cap Rates by Canadian City 2025

CityTypical Residential Cap RateMarket Characteristic
Vancouver2.5–3.5%Appreciation market
Toronto3.0–4.0%Appreciation market
Ottawa3.5–4.5%Near-neutral cash flow
Montreal4.0–5.0%Mixed appreciation/yield
Calgary4.5–6.0%Cash-flow positive
Edmonton5.5–7.0%Strong yield market
Winnipeg5.0–6.5%Strong yield market
Halifax4.5–5.5%Growing yield market

Cap Rate vs. Cash-on-Cash Return

Cap rate ignores financing. Cash-on-cash return measures your actual return on the cash you invested (down payment). Both metrics are useful:

A property with a 5% cap rate and a 5.5% mortgage rate will have negative cash-on-cash return (the borrowing cost exceeds the property yield). This is why many Canadian properties are cash-flow negative despite appearing to have reasonable cap rates.

Using Cap Rate to Value a Property

You can use cap rates to estimate what a property should be worth based on its income:

Property Value = NOI ÷ Market Cap Rate

If comparable properties trade at a 5% cap rate and your property has $30,000 NOI:
Implied value = $30,000 ÷ 0.05 = $600,000

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Conclusion

Cap rate is the essential starting metric for evaluating any Canadian rental property. Use the calculator above to quickly assess any property's yield, compare it to local market cap rates, and decide if the income justifies the price. In low-cap-rate markets like Toronto and Vancouver, returns come primarily from appreciation — understand which type of market you're investing in before you buy.